Binance offers a variety of trading bot products that have different trading strategies and use cases. In this guide, we will cover some of the most popular bots and strategies, including:
- Spot Grid
- Contract Grid
- Arbitrage Bot
- Smart Position
- Spot DCA
- Investment Plan
- Spot Grid
The spot grid bot is designed to buy low and sell high within a predetermined price range. It divides your investment into multiple small orders, placing buy orders at lower prices and sell orders at higher prices. With this method, traders can profit from market fluctuations without predicting the exact price trend.
Contract Grid
As the name implies, the Contract Grid Robot is similar to the Spot Grid Robot, except that it operates in the contract market. It automatically executes trades by placing buy and sell orders within a specified price range. The main difference between them is that the Contract Grid Robot uses leveraged trading, which can amplify returns and risks. Even if there is no underlying asset to sell, a short position can be opened in this way.
The Contract Grid Robot is suitable for experienced traders who are comfortable with high risks and have a full understanding of contract trading.
Arbitrage Bot
Arbitrage Bot, also known as Funding Rate Arbitrage Bot, allows users to explore price differences between different markets. The bot usually uses an arbitrage strategy between perpetual futures contracts and equivalent spot.
For example, a user can program the arbitrage bot to open a long position in a Bitcoin contract when the funding rate is negative, while selling an equivalent amount of Bitcoin in the Binance spot market. This way, users can receive funding fees from the futures market position while hedging the risk of price changes through spot orders.
The above example is called a reverse arbitrage strategy. In the opposite case, the strategy is called a forward arbitrage (i.e., opening a short contract position when the funding rate is positive and buying an equivalent amount in the spot market to hedge against market fluctuations).
For those who are not familiar with funding rates, it is a payment made between long and short position holders in the perpetual contract market. Such payments ensure that the contract price is aligned with the spot price of the underlying asset.
Smart Positioning
Smart Positioning regularly adjusts the proportion of each asset to help you maintain a specific asset allocation in your portfolio. This is especially useful for long-term investors who want to ensure that their portfolio remains consistent with their investment goals despite market fluctuations.
For example, let's say you want to always keep 45% of your portfolio in Bitcoin. If the price of Bitcoin rises, while the prices of other assets fall, the value of your Bitcoin allocation will be higher than 45%. In this case, Smart Positioning will automatically exchange some Bitcoin for other assets to ensure that your allocation returns to the target range of 45%.
Spot DCA
DCA stands for Dollar Cost Averaging. This investment strategy involves buying assets at regular intervals to get a better average price. With Spot DCA, you can keep spreading out your buy and sell orders, which helps reduce the impact of volatility.
For example, you can use the Spot DCA robot to buy more cryptocurrencies when prices are falling, or gradually sell some of your holdings when prices are rising.
Fixed Investment Plan
Fixed Investment Plan is also related to DCA. It helps you gradually accumulate cryptocurrencies by buying cryptocurrencies regularly. Similar to the spot DCA robot, but only supports buying and is designed for long-term investment. You can create a fixed investment plan and customize it according to your preferred assets and investment period.
